Kampala Revenue Improvement Project

concluded

Kampala Revenue Improvement Project (KRIP) was a management contract between the state-owned utility National Water and Sewerage Corporation (NWSC) and H. P. Gauff Ingenieure GMBH & Co. (Gauff) of Germany, effective from January 1998 for a period of 42 months. Kampala Water Supply Area (KWSSA) formed 68% of NWSC's total operations and accounted for the same proportion of the corporation’s revenue base. NWSC was initially set up in 1972 to develop and operate water supply and sewerage services on a self sustaining, national and commercial basis in designated areas of the country. NWSC was responsible for provision of water supply and sewerage services in the capital city of Kampala and eleven other main towns of the country. Beginning in 1996, the rate of improvements in the performance of the utility had significantly diminished with revenue collection steadily falling, high levels of unaccounted for water, and significant overstaffing. The management of NWSC considered private sector participation in the deliverance of the services, without changing ownership of assets. The aim of KRIP was to commercialize all NWSA operations in KWSSA. Indicators were developed to monitor and evaluate the performance of the project. Gauff was to improve water meter reading and the billing and collection system, enhance customer care, reduce water losses, improve maintainence, and increase the rate of new household connections to about 3,000 per annum. There was a fixed management fee of initially 390,000 DM (later reduced to 290,000 DM) per month payable in local currency and not pegged to performance. NWSC was to be responsible for operational costs (including staff costs) and could only terminate the contract if the firm persistently failed to achieve 75% of the targets over four consecutive months. The KRIP contract concluded on June 30, 2001. Performance results were mixed. Billings increased from 1,325 million (local currency) in 1998 to 1,411 million in 2001 reflecting 61% target achievement while collections increased from 1,025 million to 1,579 million, a 102% target achievement. Unaccounted for water was reduced to 48% from 60% and the number of new connections increased from a monthly average of 150 to 299 over the contract period. Conflicts between the operator and NWSC emerged as government ministries failed to pay bills/arrears on time and cash flow problems led to difficulties in the payment of the management fees. Another noted problem was a lack of funds for investments in network improvements in order to reduce high level of water losses. After the contract expiration, an interim NWSC management was set-up to run Kampala. The new private operator, ONDEO Services Uganda Limited, was named in early 2002. None None